Discussion Board 3
Primary Task Response: Within the Discussion Board area, write 400-600 words that respond to the following questions with your thoughts, ideas, and comments. Be substantive and clear and use examples to reinforce your ideas.
- Explain the importance of developing metrics and KPIs in logistics and supply chain operations.
- Explain what metrics indicate and how they can benefit an organization.
Provide citations and references to support your discussion.
Responses to Other Students: Respond to at least 2 of your fellow classmates with a reply of 100-200 words about their Primary Task Response regarding items you found to be compelling and enlightening. Use the following to guide you in your responses:
- Discuss the pros and cons of each technique discussed.
- Would you utilize it in your current of future place of employment? Provide justification for why or why not.
Respond to these post !
post # 1
Introduction to Logistics/Supply Chain Management
SCM210 Unit 3
April 19th, 2019
Metrics and KPIs
To do business successfully and efficiently, one must understand and know what Metrics and KPIs are and the differences between them. Metrics are a quantifiable measurement used to track and record different parts of a business while KPIs, Key Performance Indicators, are quantifiable measurements that define sets of values against what metrics are measured (Hatheway, 2016). Now how do they relate to one another? Metrics support the KPIs while the KPIs tend to support the overall business in general (Hatheway, 2016). Developing metrics and KPIs is extremely important to any business or organization. Without determining the right metrics to use, time and effort could be wasted, and the success of the organization is diminished or completely fails. If there is no support to the KPIs then there is no support for the business in general. To develop metrics correctly, a business has to determine which type of metrics are needed and how they are focused. Metrics are used to accurately measure the performance over the entirety of the supply chain, being divided into internal metrics and customer metrics. Internal metrics are focused on the internal workings of the supply chain from the employees to what the employees are doing. Customer metrics, also known as external metrics, focus on the cost, delivery, and quality of a product (Editorial board, 2015).
Metrics indicate the performance and productivity of a business or organization in a way that is measurable and quantifiable. They benefit organizations because they show how their employees are working, what is being produced for what profit, cost of producing, and many other variables within a business. Successful businesses and organization use metrics to ensure that their efforts, time, and money are being put in the right place, for the right amount of money, without being a total waste of time or energy. All metrics measurements are based on the specific goals of the business and will be dealt with as such goals change and evolve over time (Karlson, 2018). Without these metrics, businesses would never really know how their business is doing and would never know if they were achieving their goals or not. As each goal should be made on a measurable and attainable level, metrics and KPIs are key.
Editorial Board. (2015). The Fundamentals of Supply Chain Management (1st ed.). Schaumburg, IL: Words of Wisdom, LLC.
Hatheway, R. (2016, July 8). The Real Difference Between Metrics and KPIs. Retrieved from https://www.linkedin.com/pulse/real-difference-bet…
Karlson, K. (2018, October 26). 12 Business Metrics That Every Company Should Know. Retrieved from https://www.scoro.com/blog/12-business-metrics/
When operating a supply chain, it is important to know if all aspects of the supply chain are running successfully. A successful supply chain ensures that the highest amount of ending product is produced in the fastest, lowest costing way. To view the performance of a supply chain the metrics can be used. Three main metrics companies can use include; time, quality and cost (Murray, 2018). Time metrics can include on-time deliveries, amount of time it took to produce or process orders and/or the amount of time it took to fulfill the order complete. The cost metric is probably the most important metric to most companies because it can help in the determination of where they can improve the supply chain to gain more cash flow. One cost metric that companies examine is inventory carrying cost, is it cost efficient holding products in a warehouse. The third metric is quality, it mainly examines customer satisfaction in the product. Completed needed improvements in quality of a product can greatly increase customer satisfaction (Murray, 2018).
When a company is choosing a metric to look at in the supply chain, some characteristics should be considered to ensure the metric will help create success. The metric should be easy to understand, clear and concise to what itâ€™s measuring. It should be quantitating, meaning it can be expressed by a â€˜real dataâ€™ value. A good metric should measure what is important. The metric should allow for corrective action if needed. If not enough of a product is being processed, the corrective action would be to increase the output. Lastly, the metric should be a value that is easy to collect. Trying to determine a complex performance metric can prove to be counterproductive (Murray, 2018).
Key Performance Indicators (KPIs) are metrics, like stated above, that measure the performances of processes with a companyâ€™s supply chain. KPIs are used for the companies to constantly improve in their procedures to better their profits (Felicio, 2018). They examine logistic management and provide constant feedback. Some of the main KPIs that may be essential in a companyâ€™s logistics include the following;
Order accuracy- mistakes made from order placed to delivered.
On Time In Full (OTIF)- percent of orders delivered in time frame promised.
Lead Time- how long a product takes from start to finish.
Stock Rotation- average between a companyâ€™s stock and the outflow of products.
Warehousing Costs- expense involved in keeping inventory.
Truck Turning- amount of time it takes from pick up product to delivery and back again.
Capacity Utilization- measures if the delivery transportation load is used to capacity.
Productivity- measures companyâ€™s output performance.
Transportation Cost- measures cost related to final deliveries of products.
Number of Shipments- average shipments sent out by the company.
The listed KPIs are not the only metrics a company can measure. There are many more that can be measured for the productivity and performance (Felicio, 2018).
Felicio, M. (2018, June 14). 10 KPI’s you should implement in your logistics company. Retrieved from https://www.linkedin.com/pulse/10-kpis-you-should-implement-your-logistics-company-marina-felÃcio
Murray, M. (2018, September 09). What Are Supply Chain Performance Metrics? Retrieved April 22, 2019, from https://www.thebalancesmb.com/supply-chain-performance-metrics-2221392